Market Price and Factor Cost

The same aggregate (say NNP) can be valued in two different ways depending on whether indirect taxes and subsidies are included.

Market price (MP) is the price actually paid by the buyer in the market — it includes indirect taxes (GST, excise, customs) charged by the government and excludes any subsidy given by the government to the producer.

Factor cost (FC) is the price actually received by the producer for the factors of production it employed — it excludes indirect taxes and includes subsidies, because indirect taxes never reach the producer as income and a subsidy is extra income the producer receives beyond what the buyer paid.

So, for any aggregate X: $X_{FC} = X_{MP} - NIT$, and equivalently $X_{MP} = X_{FC} + NIT$.

National Income (NI), strictly defined, is Net National Product at Factor Cost — the sum of factor incomes (rent, wages, interest, profit and mixed income) actually accruing to the normal residents of a country during a year:

The full chain, useful for converting between any two aggregates in one line:

$GDP_{MP} \xrightarrow{+\,NFIA} GNP_{MP} \xrightarrow{-\,\text{Depreciation}} NNP_{MP} \xrightarrow{-\,NIT} NNP_{FC}\,(= NI)$ …